Published on September 12th, 2018 | by Steve Hanley0
Forget All The Noise About Tesla & Musk — “Buy TSLA,” Baird Analyst Says
September 12th, 2018 by Steve Hanley
There is a lot of drama in the world of Tesla and Elon Musk these days. As CleanTechnica director and chief editor Zachary Shahan has pointed out on several occasions recently, the number of articles in the MSM (and even some here at CleanTechnica) that disparage the company and its mercurial chief executive far outweigh those that favor them. In the investments community, many analysts are imploring shareholders to unload their Tesla stock before it tanks completely, leaving them penniless and crying, “Why me?”
Whether all the negativity is being driven by the Koch brothers or auto industry leaders, Elon hasn’t done much lately to reassure the faithful. He has roiled the waters by tweeting about taking the company private and then reversing course a wild week and a half later. Reports that he is taking Ambien to help him sleep at night are hardly the stuff that inspires confidence in a leader.
But all that is just background noise, says Baird & Co. analyst Ben Kallo. After a recent tour of Gigafactory 1 in Nevada, Kallo penned a research note to his followers telling them to have faith and believe in Elon. “We recently toured the Fremont factory and came away incrementally positive. Gigafactory 1 creates a significant barrier for competition and manufacturing capability should be a competitive advantage for TSLA over the long term. We believe TSLA’s Gigafactory enables the company to drive down costs through an industrialization of battery pack assembly and economies of scale.” (Emphasis added.)
Kallo continues to advise his clients to buy Tesla stock and has doubled down on his price target of $411 per share. “While negative headlines around management turnover and executive leadership could be an overhang, we are labeling TSLA a ‘Fresh Pick’ as we believe strong fundamentals should drive shares higher,” he writes. The stock closed last Friday at $263.24, then rose 8% in trading on Monday. It has risen 10% today and is nearly at $290, but that is a separate story.
According to CNBC, Kallo believes improving margins and increasing Model 3 production, more information about additional factories, possible introduction of future products, and the continuing ramp up of production at the Nevada facility, together with an increase in Tesla Energy revenue, will all contribute to a higher price for the stock in the foreseeable future.
As always, be aware that CleanTechnica is not in the stock analysis business and nothing we say should be construed as recommending buying or selling shares in any companies we report on. In fact, if you rely on anything we say in a single article, you probably shouldn’t be active in the stock market at all!
A Non-Professional Point Of View
Here’s another endorsement of Tesla and its long-term prospects from one of our readers, Wietze Post, who left this cogent comment to a recent article about electric vehicles:
“Tesla’s present sales do not only displace other ICE brands’ sales today, but future sales of those other brands as well, perhaps even 4X as many over the course of time. Tesla’s are designed to last for a long, long time. Tesloop’s vehicles are clocking up mega miles and will do many more.
“Due to Tesla vehicles longevity, they will not be replaced by new vehicles within the vehicle fleet (seen as a whole) for a long time. They may be resold as used, but the used vehicles will last for an extraordinarily long time. People will sell their Teslas because they’ve grown tired of looking at them, not because they’re broken.
“The whole new-car sales market will become smaller (also due to other influences). The average price of new vehicles will also trend lower, because when there are very good used vehicles available at a low price, then it won’t make much sense to pay much more for a new car. This will ultimately result in a larger proportion of Teslas on the road than we would now expect, compared to other brands with a shorter lifespan.
“Tesla’s speed of ramping up production and being ahead of others with actual sales will have a disproportionate impact on other ICE brands’ future sales. Because the legacy brand has no (or insufficient) EVs available to sell, the buyer will get a Tesla, at which point the legacy brand has lost that client ‘forever’.
“Another aspect is that Tesla has to future-proof their vehicles and anticipate technology (such as level 5 autonomous drive) which will keep their vehicles up to date even twenty years from now. Teslas’ longevity will also benefit our environmental impact.”
I promised this reader his remarks would probably appear in a Tesla-related article soon. He probably didn’t expect it to happen quite this soon, however. With regard to the Tesla Energy piece of the puzzle, I have always maintained that Tesla is not a car company that also builds batteries, it is a battery company that also builds cars. Focusing only on the cars runs the risk of missing a big piece of the total Tesla pie. Ben Kallo seems to be saying the same thing.